DBP v CA

Petitioner: DEVELOPMENT BANK OF THE PHILIPPINES

Respondent: COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by
CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE POOL

Doctrine: The agent who acts as such is not personally liable to the party with whom he contracts, unless
he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice
of his powers.” The liability of an agent who exceeds the scope of his authority depends upon whether the
third person is aware of the limits of the agent’s powers.

Facts: Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan of
P500K with the Development Bank of the Philippines (DBP). As the principal mortgagor, Dans, then 76
years of age, was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage
Redemption Insurance Pool (DBP MRI Pool). The loan was reduced to 300k and was approved and
released by DBP. The MRI premium of Dans, less the DBP service fee of 10 percent, was credited by DBP
to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit.

On September 3, 1987, Dans died of cardiac arrest. The DBP relayed this information to the DBP MRI Pool.
On September 23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage,
being over the acceptance age limit of 60 years at the time of application.

DBP apprised Candida Dans of the disapproval of her late husband’s MRI application. DBP offered to
refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to accept the
same, demanding payment of the face value of the MRI or an amount equivalent to the loan. She, likewise,
refused to accept an ex gratia settlement of P30,000.00, which the DBP later offered.

Respondent Estate, through Candida Dans as amdinistratrix, filed a complaint with the RTC Basilan against
DBP and the insurance pool for “Collection of Sum of Money with Damages.” Respondent Estate alleged
that Dans became insured by the DBP MRI Pool when DBP, with full knowledge of Dans’ age at the time
of application, required him to apply for MRI, and later collected the insurance premium thereon. RTC ruled
in favor of respondent. CA affirmed RTC’s decision in toto.

Issue: Whether or not DBP as an agent pf DBP MRI Pool is liable to respondent?

Ruling: Yes.
In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an
insurance agent. As an insurance agent, DBP made Dans go through the motion of applying for said
insurance, thereby leading him and his family to believe that they had already fulfilled all the requirements
for the MRI and that the issuance of their policy was forthcoming. Apparently, DBP had full knowledge that
Dans’s application was never going to be approved. The maximum age for MRI acceptance is 60 years as
clearly and specifically provided in Article 1 of the Group Mortgage Redemption Insurance Policy signed in
1984 by all the insurance companies concerned

Under Article 1897 of the Civil Code of the Philippines, “the agent who acts as such is not personally liable
to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority
without giving such party sufficient notice of his powers.”

The DBP is not authorized to accept applications for MRI when its clients are more than 60 years of age.
Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP
exceeded the scope of its authority when it accepted Dans’s application for MRI by collecting the insurance
premium, and deducting its agent’s commission and service fee.

The liability of an agent who exceeds the scope of his authority depends upon whether the third person is
aware of the limits of the agent’s powers. There is no showing that Dans knew of the limitation on DBP’s
authority to solicit applications for MRI.

If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal
on the agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the
latter is liable for damages to him (V Tolentino, Commentaries and Jurisprudence on the Civil Code of the
Philippines, p. 422 [1992], citing Sentencia [Cuba] of September 25, 1907). The rule that the agent is liable
when he acts without authority is founded upon the supposition that there has been some wrong or omission
on his part either in misrepresenting, or in affirming, or concealing the authority under which he assumes
to act (Francisco, V., Agency 307 [1952], citing Hall v. Lauderdale, 46 N.Y. 70, 75). Inasmuch as the non-
disclosure of the limits of the agency carries with it the implication that a deception was perpetrated on the
unsuspecting client, the provisions of Articles 19, 20 and 21 of the Civil Code of the Philippines come into
play.

Dispositive Portion: WHEREFORE, the decision of the Court of Appeals in CA G.R.- CV No. 26434 is
MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate of Juan B. Dans the
amount of P1,476.00 with legal interest from the date of the filing of the complaint until fully paid; and (2) to
PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00) as moral damages and the amount of
Ten Thousand Pesos (P 10,000.00) as attorney’s fees. With costs against petitioner. SO ORDERED.